Murabaha is a particular type of sale in which the seller discloses the cost incurred and adds an agreed profit margin.
As a financing technique, the institution purchases goods requested by the client and then sells those goods to the client at a disclosed cost-plus-profit price. Repayment is made according to the agreed contract, including future installments where applicable.
Murabaha is not a loan advanced on interest. It is a sale of a commodity for a cash or deferred price. The institution first acquires the goods from a third party and then resells them to the customer for a pre-agreed amount.
Transparency by design
The institution discloses both its cost and its profit margin to the customer.